China posts surprise trade surplus on export rebound

Apr 10, 2012

China unexpectedly reported a trade surplus in March, with capital inflows lessening the odds that Premier Wen Jiabao will further loosen monetary policy to support growth.

The surplus was $US5.35 billion, the customs bureau said in a statement on its website today. Exports rose 8.9 per cent from a year earlier, while inbound shipments increased 5.3 per cent. The median estimate in a Bloomberg News survey of 30 economists was for a $US3.15 billion trade deficit.

Today's data, along with a rebound in March inflation reported yesterday, may push officials to exercise caution in loosening monetary policy. The improving U.S. economy and stabilizing Europe debt crisis stand to boost China's exports in coming months, underscoring Commerce Minister Chen Deming's forecast last month that China's foreign trade will probably improve in the second half.

“Policy makers are not likely to roll out any aggressive loosening,” Chang Jian, an economist at Barclays Capital in Hong Kong who formerly worked for the Hong Kong Monetary Authority, said before the release. “Instead they will stick to their cautious stance.”

The benchmark Shanghai Composite Index pared losses following the report, trading 0.7 per cent lower at 11:12 a.m. local time after dropping as much as 1 per cent.

Exports may be stabilizing now, Chang said, citing improvement in export-gauge readings in two purchasing managers' indexes for March.

February deficit

China reported a trade deficit of $US31.5 billion in February, its first shortfall in a year and the biggest since at least 1989, as Europe's debt crisis crimped exports and imports rebounded after a weeklong Chinese holiday.

The median forecast in a Bloomberg News survey of 29 economists was for a 7 per cent gain in exports from a year earlier, after an 18.4 per cent increase in February. Import growth, which compared with a 9 per cent median estimate, slowed from 39.6 per cent the previous month.

Speaking in southern China last week, Wen pledged to take measures including export tax rebates to ensure “steady growth” in trade this year and aid exporters hit by rising costs and weak demand, state media reported.

At the same time, the government is taking measures to stimulate imports and reduce the trade surplus that amounted to $US155 billion last year. The State Council announced on March 30 cuts in import duties on some commodities and daily necessities.

Emerging-market exports

China is countering a slowdown in exports to Europe by boosting sales to emerging markets. Carmakers including Geely Automobile Holdings Ltd. and Chery Automobile Co. will probably boost overseas shipments by about 50 per cent this year, according to a February forecast from the China Chamber of Commerce for the Import & Export of Machinery & Electronic Products.

The yuan had its first quarterly decline since December 2009 in the first three months of 2012, sliding 0.06 per cent to close at 6.2980 per dollar March 30 in Shanghai, according to the China Foreign Exchange trade system.

Inflation rose a more-than-forecast 3.6 per cent in March as gains in food prices quickened, the statistics bureau reported yesterday. The rebound may limit Wen's scope for policy loosening, according to Song Yu, a Beijing-based economist with Goldman Sachs Group Inc.

China can pursue a “moderately loose” fiscal policy as growth slows yet can't “substantially” ease monetary policy because of inflation, Tang Min from the Counsellors' Office of the State Council said in today's People's Daily, the Communist Party's mouthpiece.